How to use this glossary
Utility security documents combine insurance, credit, and utility terminology. The definitions below provide general education, not interpretations of a particular bond or tariff. Defined terms in the executed instrument and the utility's current rules control. Ask the utility to confirm acceptance, amount, form, term, and eligibility, and ask the surety to explain its underwriting and issuance requirements.
Core bond terms
Bond form: The document containing the guarantee's operative language. A utility may mandate its own form. It can define covered obligations, claim conditions, notice, duration, and cancellation.
Commercial utility deposit bond: A surety bond that a utility may accept as security for a commercial customer's covered payment obligation. It is not a substitute for paying monthly bills and is not insurance protecting the principal.
Indemnity agreement: The principal's agreement, often joined by other indemnitors, to reimburse and protect the surety according to its terms. A surety's valid claim payment generally remains the principal's financial responsibility.
Indemnitor: A person or entity that undertakes obligations to the surety under an indemnity agreement. The bond and indemnity agreement are separate documents.
Obligee: The party protected by the bond—typically the named utility. The obligee sets its security requirement under applicable rules and decides whether the submitted bond is acceptable.
Penal sum: The maximum stated amount of the surety's liability under the bond, subject to its terms. It does not necessarily cap the principal's direct utility debt or indemnity obligations.
Principal: The bonded utility customer whose covered performance or payment is guaranteed. The principal remains responsible for the underlying account.
Surety: The company issuing the bond. It underwrites the principal and responds to covered claims under the instrument. Approval and issuance are not guaranteed.
See Principal, Obligee, and Surety for examples of these relationships.
Utility-account terms
Account security: Cash, a bond, letter of credit, or another instrument the utility accepts to address payment risk. Permitted forms differ by provider and customer class.
Customer class: A tariff category such as residential, commercial, or industrial. Classification can affect rates, credit rules, and security requirements. See Commercial vs. Residential Utility Deposits.
Deposit: Funds held by a utility under its rules as security. A deposit and a surety bond are not the same asset or contract.
Obligation: The duty being secured. For a utility bond, it is commonly payment for service, but the bond wording determines coverage.
Tariff: A utility schedule or body of rules, often filed with or approved by a regulator, that can govern rates, service, deposits, notices, and other terms. Always use the current version applicable to the service and account.
Utility: The provider of electric, natural gas, water, wastewater, telecommunications, or another covered service. Regulatory status and terminology vary.
Issuance and lifecycle terms
Continuous bond: A bond designed to remain in effect until canceled under its terms rather than expiring on a fixed annual date. “Continuous” does not mean irrevocable or permanent.
Continuation certificate: A document evidencing continuation for another period when allowed. Whether the utility requires or accepts one depends on its rules.
Effective date: The date coverage begins under the bond. It should match the utility's requirement and does not automatically cover earlier obligations.
Power of attorney: Evidence that an individual is authorized to execute bonds on behalf of a surety. Utilities may require it with the filing.
Rider: A surety-issued amendment to an existing bond, potentially changing the amount, principal name, or another term. A rider requires proper execution and utility acceptance; a principal should never edit the bond itself.
Underwriting: The surety's evaluation of the applicant and obligation. It may include financial condition, payment history, ownership, bond amount, and indemnity. Submission does not guarantee a bond.
For ongoing controls, read Utility Bond Renewal and Cancellation.
Claim terms
Claim: A demand by the obligee alleging a covered default. A claim is evaluated under the bond and supporting facts; it is not automatically payable merely because submitted.
Default: Failure to perform the obligation as defined by the governing documents, commonly nonpayment of utility bills.
Demand: The obligee's request for payment or performance under the bond. Form, documentation, and timing requirements may apply.
Release: Written confirmation that an obligee relinquishes specified rights in security. Account closure alone should not be assumed to release a bond.
Cancellation notice: Notice issued according to the bond's cancellation clause. Cancellation is generally prospective and does not automatically eliminate liability that attached before its effective date.
Read Utility Bond Claims for practical response steps.
Research with the definitions in context
Browse Bonds, locate jurisdictional resources through States, or continue to the Utility Bond FAQ. A directory or glossary cannot establish what a specific utility will accept. Obtain the provider's written account instructions and current form before applying.